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Banking In a Digital Era: Wall Street's 'Uber Moment'

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WASHINGTON  Disruptive innovation: While you may not recognize the term, it's affecting life and business as we know it. It happens when new ideas and technology shake up old markets by creating new ones. 

We've seen it in transportation, hospitality and now with banking. It's being called Wall Street's "Uber moment."

A 'New' Way to Finance

"The financial technology, or fin-tech, is really changing the way, fundamentally, that customers interact with their bank," explained Rob Morgan, vice president of Emerging Technologies at the American Bankers Association.

Morgan says customers expect to have the same type of digital access to banking as they do to other important services.

Think about it. You can get your mail through a smart phone, order dinner, even hail a cab, all just by pulling up an app. Now thanks to financial technology, you can also access your money.

"In terms of banks and non-banks, in this space there are a number of players and really banks are looking pretty actively to partner in this space so banks are looking, as are these new companies, to work together to deliver the customer the best experience," Morgan told CBN News.

Banking Apps

Apple, Google, Amazon are the tech giants all on board with financial technology. Most of them are starting off with digital payment apps.

"They believe that this modernization of the banking sector is going to make financial services more accessible, more affordable and ultimately more secure," said Brian Peters, with Financial Innovation Now, an organization that represents Apple, Amazon, Google, Intuit and Paypal.

"I think whenever you have a little bit of competition and a little bit of change, it's tough. People need a little bit of time to accommodate, but this change is coming it's coming quickly. It's here and now and we're here to help policy makers understand why this is good, good for consumers," said Peters.

While they may be a little late to the party, major banks have entered this new reality.

"You see banks all across the spectrum investing in things like innovation labs where they're delivering these new products directly to customers," Morgan said.

Wall Street vs. Silicon Valley

Banks are competing in this space, but it seems they face an uphill battle. According to Harris Research firm, 77 percent of consumers have a positive impression of the tech industry, compared to 35 percent who feel good about the financial industry.

"We see a lot of partnerships. It could be characterized as a big battle between Wall Street and Silicon Valley, but at the end of the day we see a lot more nuance. There will be some skirmishes and we're going to have a great robust discussion about how to enable this technological future, but we're excited about it," said Peters.

Those skirmishes seem to be taking the shape of regulations. The tech industry wants breathing room for young startups, while the banking industry believes its new competitors should follow the same rules it does.

"Today there are a lot of rules and regulations in place that provide protections for consumers and you need to make sure that those protections are being applied equally across the board," Morgan told CBN News.

"We're hopeful that policy makers can find ways to minimize some of the early regulatory impact that they may face so that they can at least get off the ground, prove their business model and actually bring something to market," said Peters.

Digital Financing = More Security 

Security is a major concern of consumers when it comes to digital financial services. Peters says your cell phone will eventually provide better protection of your information than a debit or credit card.

"When you think about making a payment or storing financial information on your smart phone, that smart phone is encrypted, in a variety of ways. To gain access to it, in later models now, you have to use biometric finger print authentication," said Peters. "Because of all the additional security, you have both now greater convenience and greater security that didn't exist before."

Some of the popular services include Venmo, Google Wallet and Apple Pay. They allow you to transfer money and buy products without ever stepping into a bank or pulling out your credit card.

This especially appeals to the Millennial generation. According to Viacom Media, 73 percent of Millennials prefer using digital services than going to a bank.

"I think you can use your smart phone for everything. I use my Venmo app, I use my bank of America app, just everything can be done on my phone, which is great," said Molly Nesbitt, a Millennial and fin-tech user.

"My bank doesn't have any physical locations, I really do all of mine (banking) on my phone," said Rebecca Smith, another Millennial fin-tech user.

Older Generations Benefit Too

But it's not Millennials who stand to gain the most from this technology.

"In my mind, there's a proportionally bigger opportunity to help older generations because if you can't get around very easily or if you're in a small town where the bank branch is far away, managing your finances can be tough," Peters noted.

Despite battles on Capitol Hill, both the banks and the tech industry agree that, ultimately, the consumer will be the winner.

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